Building the world’s first AI-powered financing ecosystem for small coffee farmers

Small farmers are responsible for global coffee production

Small farmers (<5 hectares) are responsible for the ~50% of global food calorie production, ~70% in some of the fastest growing food markets in the world. They are also vastly underbanked which leads to inability of investing in productivity, competitiveness and long-term sustainability. Less than 10% of the estimated US$200 billion market for small farmer financing in emerging countries will be met by financial institutions due to limited understanding of small farmer credit risk and high service costs in rural markets.

We believe there is a global, profit-for-purpose business case of scaling financial inclusion in small farmer agriculture. As food demand is projected to increase with a growing population, a new vision for agricultural finance is required to manage the economic, social and environmental challenges of the future.

Access to credit through technology is at the heart of this challenge but a data-driven farmer is only as strong as its weakest value chain partner. Given the particular complexities and uniqueness of agriculture, a “value chain approach” to financial services that leverage on existing supply chains coupled with innovative technology is a disruption ready to happen. Moreover, it is the entry point to address global challenges related to sustainable rural development (e.g. Climate Change, poverty, food security, etc.) and enable solutions that produce global positive network effects.

Our vision is to enable unique digital banking solutions for small farmers in emerging markets by pioneering a three-part solution: 1) improve the scoring of farmer “credit-worthiness” with an alternative algorithmic approach tailored to agriculture and natural data around small farmers, 2) empower agribusinesses and their supply chains as alternative aggregation points for financial service delivery, and 3) provide financial institutions a simplified entry-point to small farmer banking. The outcome are AI-driven ecosystems that empower small farmers and their partners across the value chain.

Coffee berries ready for harvest

Coffee is a vast global industry and small farms are responsible for an estimated ~70–80% of the supply. It is estimated US$25 Billion must be invested in 11.5 million small farmers to raise industry productivity yet only 5% of farmers have been reached through heavily subsidized initiatives.

In 2017 we partnered with Asociación Aldea Global Jinotega in Nicaragua to build a Proof of Concept and establish the challenges/opportunities of a “value chain approach” to small farmer credit scoring. Aldea Global is the largest small farmer organization in Nicaragua managing more than 12,000 members in the production of coffee, vegetables and other agricultural products; it is also a regulated Microfinance institution and one of the largest coffee exporters in the country. The PoC identified key insights and a roadmap with potential next steps.

In February 2018 we launched a Pilot with Aldea Global and the support of the Rabobank Foundation to begin building a prototype platform that could begin testing insights and incrementally optimize processes (e.g. improved business intelligence, expedited loan approval, financing bundled with tailored agronomic assistance, etc.). Baby steps, lots of exciting work ahead.

Stay tuned.

Photo by Nathan Dumlao on Unsplash

Vinculum is an enabling platform that uses AI and Earth Observation to connect small farmers in emerging countries to sustainable financing

Vinculum is an enabling platform that uses AI and Earth Observation to connect small farmers in emerging countries to sustainable financing